Look back 2019 and Tax Calendar 2020 – Financial Services Industry
In a rapidly changing environment, tax and legal issues are never far away. In this e-flash we provide you with a retrospection on the most important tax developments of 2019 for the Financial Services industry (regarding operational taxes) as well as some attention points and opportunities. We also take the opportunity to look forward to the New Year 2020 and are pleased to refer to our Tax Calendar for 2020.
Tax on Securities Accounts
For a short period of time (from 10 March 2018 to 30 September 2019) Belgium levied a tax on securities accounts. This annual wealth tax of 0,15% applied to natural persons who - during a reference period - were the (registered) accountholder of one or more Belgian and/or foreign securities accounts with an average value of at least EUR 500.000.
The Belgian Constitutional Court has annulled this tax in its judgment of 17 October 2019 for incompatibility with the Belgian constitutional principles of equality and non-discrimination. Yet, the Court decided to maintain the legal consequences of the annulled provisions for the past. Therefore taxpayers are generally not entitled to reclaim the tax (despite its unconstitutionality) for taxable periods already elapsed, i.e. the taxable periods 10 March 2018 – 30 September 2018 and 1 October 2018 – 30 September 2019. This also means that taxpayers with foreign securities accounts will still have to declare and pay the tax by this summer (same deadline as for their personal income tax return), if their foreign financial institution did not withhold the tax at source for the last reference period. Still there remain in our view possibilities for obtaining a refund of the tax (via litigation), based on other grounds than those invoked in the judgment at hand.
Belgian tax on savings income (article 19bis Belgian Income Tax Code ‘92)
The Program Law of 25 December 2017 significantly broadened the scope of the Belgian tax on savings income (article 19bis BITC92), effective as of 1 January 2018. By circular letter of 25 September 2019, Belgian tax authorities provided some clarification and guidance hereon. From the circular letter also follows the possibility of a reclaim of Belgian withholding tax (WHT) / personal income tax that was withheld / paid on capital gains of certain investment funds / companies, i.e. taxable gains on units or shares of EU investment funds / companies not qualifying as undertaking for the collective investment in transferable securities (UCITS), e.g. private equity funds, hedge fund and real estate investment vehicles (REITs) that had been acquired through 31 December 2017.
Spin-offs and new exemption from WHT
The law of 4 April 2019 introduced a new WHT exemption benefiting Belgian-resident individuals receiving shares (“stock dividends”) in the context of a “spin-off”.
Determining whether a transaction qualifies as spin-off for the WHT exemption typically requires a case-by-case analysis, especially if it takes place abroad.
The new WHT exemption applies to (stock) dividends attributed or paid as a result of qualifying spin-offs as of 1 January 2019.
Taxpayers who have as of 1 January 2019 incurred Belgian WHT or personal income tax on (typically foreign) spin-offs should therefore review their case and consider filing a tax refund claim.
WHT on dividends: new 60-day rule for pension funds and circular letter 15 April 2019
In 2019 the Belgian legislator introduced several new WHT anti-abuse measures, amongst others as a consequence of the infamous (and fraudulent) “cum-ex cases”.
In particular, the anti-abuse provision of article 266(4) BITC92 refuses a (domestic) WHT exemption on dividends related to a legal act or a series of legal acts that is artificial. This provision has been complemented by a special measure for dividends granted to Belgian or foreign pension funds. Specifically, if a pension fund requests a WHT exemption for a dividend on securities (e.g. shares) the pension fund has held in full ownership for only a short period of time (less than 60 days), there is a (rebuttable) legal presumption that it concerns an artificial act. If so, a refund of Belgian WHT will be granted only if the pension fund proves the non-artificiality. This results at best in an additional administrative burden for obtaining an exemption at source or by refund, and potentially in a higher final tax burden for pension funds.
The circular letter of 15 April 2019 provides some guidance by Belgian tax authorities on this new 60-day rule. In a nutshell, this circular letter confirms that Belgian WHT debtors need to obtain a certificate in which the beneficiary of the income confirms that (i) it has as its sole or main purpose the management and investment of funds raised for paying out statutory or supplementary pensions, and that (ii) it has held the shareholding on which the dividends are paid for an uninterrupted period of at least 60 days in full ownership at the date of the attribution or payment of the income or at a later date within 15 days from the date of the attribution or payment of the income. Some practical questions arise that require further clarification by tax authorities, e.g. whether it is sufficient if the pension fund declares only its commitment to hold the participation for an uninterrupted period of at least 60 days. Finally, we note that the authorities recently published a model form for the attestation by the pension fund.
Belgian Annual Tax on collective investment institutions (or “Belgian net assets tax”)
The Belgian legislator recently decided to “move” the legal provisions of Belgian annual tax on collective investment institutions (or “Belgian net asset tax”) from the Belgian Inheritance Tax Code to the Belgian Code on Various Duties and Taxes, with effect as of 1 January 2020.
The substantive provisions of Belgian net assets tax, i.e. tax rate, taxable base, the obligation and deadline for filing the annual tax declaration, payment date, etc. generally remain unchanged after the move to the Belgian Code on Various Duties and Taxes. Therefore, Belgian annual net assets tax declarations still need to be filed, and the resulting tax paid, by the end of March of each assessment year. However, legal references in tax declaration as of assessment year 2020 obviously need to be “updated”. By Royal Decree of 9 December 2020 a new model for the tax declaration was announced but has not been published in the Belgian Gazette, yet.
In contrast, procedural provisions, including those for reclaiming Belgian annual net assets tax paid change considerably as of 2020, generally leaving taxpayers in a less comfortable position:
- The deadline for reclaiming Belgian annual tax from assessment years 2020 onwards will be much shorter, i.e. 2 years (instead of 5 years in the past). For the reclaim of pre-2020 taxes, transitional rules apply.
- The available legal means for tax reclaims with interruption of the statute of limitation are being limited. Whereas previously a reclaim by registered letter sufficed, taxpayers now need to file a write of summons before the court of first instance if they wish to protect their rights.
Consistent case law of Court of Appeal Brussels sees Luxembourg SICAVs as entitled under tax treaty with Luxembourg and allows recovery of Belgian net assets tax (and possibly WHT)
The Brussels Court of Appeal has ruled by now on several occasions that investment companies such as Luxembourg SICAVs – contrary to the Belgian tax authorities’ point of view so far – can invoke the Belgium-Luxembourg income and capital tax treaty and that capital taxation is allocated by the tax treaty to Luxembourg only in typical constellations. Therefore, a refund of Belgian net assets tax has been granted to Luxembourg SICAVs (similar finding also for Dutch investment companies).
This case-law seems to entail also that Luxembourg SICAVs can invoke reduced WHT rates for dividends and interest under the Belgium-Luxembourg income and capital tax treaty, e.g. 15% for portfolio dividends (instead of suffering WHT at domestic rate of 30%).
For reclaims of both net assets tax and WHT, the statute of limitation periods need to be observed where taxes were suffered in previous years (for net assets tax, see already above under 5.; for WHT, a reclaim is possible in 2020 going back to WHT incurred during 2016).
Simplified proof of treaty residence in country with which Belgium has concluded a tax treaty
Belgian tax authorities have issued a new form (NL/FR) to facilitate taxpayers in proving their tax residence in a treaty country. Instead of having to ask foreign tax authorities to sign one form 276 Div. for each single dividend received, taxpayers may now limit themselves to obtaining one tax residence confirmation on the new form by their residence state's tax authorities per income year. Notwithstanding, taxpayers themselves still have to fill in one form 276 Div. per dividend received.
Outlook on developments in 2020
As for 2019, it may be expected that the year 2020 will bring various tax changes in legislation, administrative practice and case law. For example, the extension (in 2017) of the Belgian stock exchange tax to transactions via a foreign securities account or a financial intermediary located abroad might soon be found to contravene the Belgian constitution and/or European law. Several cases are already pending before the Belgian Constitutional Court. Moreover, the project of a European Financial Transaction Tax (or short FTT) might be revived under the new EU Commission. If so and if Belgium continues to participate in the group of countries implementing an FTT in the form of enhanced cooperation, the Belgian tax on stock exchange transactions would have to be abolished. Also, further to the annulation of the tax on securities accounts in 2019, the Belgian Parliament or (future) government may come up with an amended or similar tax on movable property.
Financial Services Tax Compliance Calendar
For all important tax compliance related deadlines in 2020, relevant for the financial sector, you can find our “tax calendar” via the following link Financial Services Tax Calendar or via our website www.kpmg.be